IBM today sold its Intel server business to Lenovo, yet another example of Big Blue eating its seed corn, effectively dooming the company for the sake of short-term earnings. It’s a good move for Lenovo and an act of desperation for IBM.

Wall Street analysts may see this as a good move but then Wall Street analysts typically aren’t that smart. They’ll characterize it as selling-off a low-margin server business (Intel-based servers) to concentrate on a higher-margin server business (Z-series and P-series big iron) but the truth is IBM has sold the future to invest in the past. Little servers are the future of big computing. IBM needs to be a major supplier and a major player in this emerging market.

If you look at the technology used today by Google, Yahoo, and Amazon and many others you’ll see it is possible to operate a large enterprise on huge arrays of inexpensive Intel servers. For a fraction of the cost of an IBM z-Series (mainframe) or p-Series (mid-range UNIX) system, the equivalent compute power can be assembled from a modest number of low cost servers and the new software tools. IBM turned its back on this truth today by selling the Intel server business.

Maybe this wouldn’t matter if IBM was selling a lot of those higher-margin Z- and P-series machines, but from the look of their latest earnings statement I don’t think that’s the case. So they are selling a lower-margin business where customer are actually buying to invest in a higher-margin business where customers aren’t buying. Yeah, right.

Information Technology is entering a commodity era of computing. Mainframes, mid-range computers and servers are becoming commodities and IBM needs to learn how to operate in a commodity market. IBM needs to become the lowest cost, highest volume producer of commodity servers. Developing new million dollar Pure systems will not bring the business needed to IBM’s Systems and Technology group.

Somebody in Armonk has to know this, right?

IBM needs to embrace the new era of large arrays of inexpensive Intel Servers. IBM needs to adapt its mainframe and mid-range applications to this new platform. The world is moving in this direction. Selling the Intel server business is the exact wrong thing to do for the long term health of IBM.

Inexpensive servers do not necessarily have to be Intel based. IBM could become the leader of large arrays of inexpensive Power- and ARM-based servers. The market is moving to commodity processors. IBM needs to evolve too and be part of that future. But as today’s news shows, they aren’t evolving and won’t evolve. I fear the company is doomed.

And on that note you may be wondering about my eBook on IBM I said would out by Christmas. Family matters intervened but it now looks like the book will appear on Amazon around the second week of February. You can be sure I’ll put a link right here when it is available.

I say it “looks like” the IBM book will be available then not because there’s any doubt about its timely completion but because of the way the publishing industry works. Some of you may remember that I’ve been slaving away for almost a year on a top-secret book for a major publisher. Well in the depths of that long book contract was a clause giving that major publisher an option on my next two books, which turns out to include this eBook on IBM.

If they like the finished manuscript they may grab it and I have no idea what that means except it sure won’t result in the book appearing sooner.

I’ve been following IBM’s downhill path (here, and through another sources) with the kind of morbid attitude one would have when looking at the (bloody) results of a nasty car accident.

This is the key event that will be narrated about in the future as “At this point, the company became unsalvageable.”. Unless IBM can come up with something completely out-of-this-world, it’s just a matter of months before it dies.

I meant that literally – at this stage, only (extraterrestrial) aliens can save the company.

Doug D
January 23, 2014 at 1:20 pm

I’m reminded of the old “we lose money on every sale, but we’ll make it up in volume!”.

What if, and hear me out for a second, what it IBM is selling the server line to Lenovo, and then taking a cut of the sales it refers?

Lenovo is in a better position to make money off the servers, and for IBM to just take a piece of each sale rather than manage the whole enchilada could be one of the smartest things it could do given it’s track record with management.

Why operate an entire division with overhead and employees and whatever? Sell it all off and then have an income stream for selling the very same devices you used to make.

IBM is losing in two ways with this. The first is that there is less reason for smaller companies to become IBM customers. That makes an even smaller base to rely on for future revenues and growth.

The second is that the volume helps get cheaper component prices for ones shared between the Intel servers and their higher end stuff.

BruceJ
January 25, 2014 at 9:37 am

Not to support IBM here, but Sysco and Food Services of America have made substantial businesses out of providing one-stop shopping.

Teague
January 26, 2014 at 5:34 pm

This is exactly why many customers went to IBM in the first place, they were a one-stop shop. Now, that they are unloading so many pieces of their businesses, they are no longer a one-stop shop. Big banks for example, used to be IBM soup-to-nuts. This is no longer the case.

unitron
January 23, 2014 at 1:38 pm

Looks like instead of buying *from* IBM, or buying IBM stock, the only smart play is what Lenovo did, literally buying IBM, or at least the parts worth owning.

Scott
January 23, 2014 at 1:40 pm

I love you Bob, but you have completely forgotten about virtualization.

You want big systems running many VM’s. Much easier to manage. Racks and racks of “blades” are on their way out … personally, I am running Citrix ver of Xen at home running 7 VM’s with a mix of Linux, BSD, and windows 7 … dude, I haven’t bought a standalone system in years, I just keep adding memory and HD space.

I work for a large hospital (and have done so for several years now) running a large electronic patient records system … everything is virtualized – we just add LPARS when we need them … buy a another server? why?

I may not agree with everything that IBM does, but I think they are right on the money on this one … virtualization is the back bone of the “cloud”

Robert X. Cringely
January 23, 2014 at 2:55 pm

I hear you, but you are thinking as an IT manager not as an IBM stakeholder.

Virtualization has allowed you to avoid buying new hardware: exactly! IBM NEEDS you to buy new hardware for them to be successful. You as a customer are lost to them.

If IBM is to succeed they must sell stuff and the stuff that is actually selling is headed now to Lenovo. And here’s the important part: the expertise is heading to Lenovo, too. IBM will be polishing Z-series machines that don’t sell while the industry goes in a completely different direction.

David
January 23, 2014 at 7:56 pm

I’m an IBMer. I’ve done delivery and sales across 3 different divisions. 30 years worth.

There’s many interesting things to say about how IBM does what it does and how it treats its own. That’s for another discussion.

In this case they do know what they are doing. They just don’t always get the timing right. They should have sold the low end server business 4 years ago when it was worth more. They recently sold their retail division to Toshiba – this was much better timed. We will transact with our mobile devices or other things with embedded technology, not with cash.

The reason for selling off the low end, low margin servers is because IBM, like Amazon, Google and others, believe the future is in utility computing, not just because of the low margins. That is why they purchased SoftLayer. Not only is this growth and development of the XaaS varieties of cloud, their SO business will ultimately run this way as well.

There is no business benefit in owning computing or storage hardware. There’s tangible business benefit in being agile by adoption of services oriented architectures running on high performance networks, connected to cloud services and to staff and customers and the multitudes of different end user devices.

Picking on how badly IBM runs their services businesses is much more fun than yet another low end, low brow hardware debate!

Martin
January 24, 2014 at 12:50 am

We’re a System p shop as well. It is worth mentioning that big bucks leave our shop and enters IBM every time we want to change the system setup (eg. adding LPARs). So from a server perspective we pour more cash into IBM than we would’ve done otherwise. So for our case, ditching intel server sales makes perfect sense.

But … The application stack run on top of AIX could easily — and at a fraction of the price — have been run on commodity intel servers with linux. And I bet others could be / are doing the same. This is probably the real problem for IBM.

scross
January 26, 2014 at 6:32 am

On the other hand, people are slowly starting to wake up now to the fact that their decision “to operate a large enterprise on huge arrays of inexpensive Intel servers” maybe wasn’t the brightest idea after all. (This has never really made sense economically for the enterprise, because such servers are really only “inexpensive” on a per-unit basis, not in the aggregate.) And the people who are having to go through the pain of upgrading from WinXP to Win7 (nobody really wants to have to do this, after all – and nobody wants to go anywhere near Win8, either) are running into major pain points, with extended time lines ranging from months to years. Linux might very well save some money here, but I don’t know how much of the other pain it would eliminate.

pyrasanth
January 27, 2014 at 3:01 pm

Changing/adding LPARs isn’t all that hard…you are paying IBM to do it?

Buck
January 23, 2014 at 1:47 pm

Bob/Anyone, I’d really like to hear your thoughts on the rest of the IBM business. Software and Services group, which is what they have been telling us is the ‘new’ path to riches seems to be doing OK but obviously lagging in the cloud area. Could it be that IBM just wants to get completely out of the hardware business all together? If you look back the acquisitions that they have been doing for many years now, all I see is software and nothing else.

Just curious what you and others think? I’m work in the SWG and it seems as though every time we hear of a workforce rebalance, it affects every group in IBM, not just hardware or STG. Its damn hard to figure out what the overall goal of the company is, other than the obvious…keep those exec paychecks fat.

Speaking of batshit crazy selloff’s, would love to hear your take on the batshit crazy move of Google buying Nest. Well, not that it’s batshit crazy in itself, but the fact that they paid $3.2BN for it is. $32M would have been a hefty price for a fancy networked thermostat and smoke alarm, $320M would have been crazy, $3.2BN elevates it to batshit status.
It’s like there is some huge corporate money laundering scheme going on, and we weren’t invited…

Chris Tobey
January 23, 2014 at 3:10 pm

I doubt Facebook, Google or any other larger player ever bought a low- or mid-range server from IBM, HP, DELL, or Acer. These businesses build their own from bulk component suppliers or buy direct from white-label ODM’s in Taiwan, et al. Facebook even has a open-specification on how to do this. Saved them $millions.

CorporateDrone
January 23, 2014 at 4:04 pm

So Bob is arguing that the future of IBM should have been building commodity servers? The Software business has gross margins over 90%…

SonWon
January 23, 2014 at 3:36 pm

What about Dr. Watson; I think this could be a game changer if the cost could be managed.

Anon
January 23, 2014 at 3:45 pm

More bad news for IBM employees. No GDP bonus for 2 and 2+ performers. Only 1 performers will get a bonus.

Idiots Become Managers
January 24, 2014 at 7:08 am

Our evil VP tells us every year he believes “low ratings and no bonus just make employees work that much harder”……. and says it with a snicker and laugh. Of course, that only works once, it it ever works at all. When you do it every year people figure out its all a big lie, if they didn’t see through it the first time. I simply can’t imagine that there’s a company out there with poorer or less moral management than IBM. Ginny should be referred to as the worlds biggest prostitute. Every year she screws the employees and the company for all they’re worth.

Zoe
February 20, 2014 at 7:10 pm

where do you get that?

Dave
January 23, 2014 at 3:49 pm

I am in the process of purchasing Business Analytics software/services from IBM. This is part of their Cognos/SPSS food chain.

The pressure involved in them getting the sale is incredible. Constant pushing to know when I may purchase, local sales people insisting upper management wants the information. Much higher pressure than SAS.

This is a tough decision for me with IBM doing everything they can to maintain earnings. It’s hard to know what they will keep and what they will let die a slow death once revenue dries up.

It seems they are making a huge bet of Big Data and the associated services. Not surprised they keep unloading pieces to make their numbers.

MikeN
January 25, 2014 at 2:54 pm

Dave, your company will be unloaded for cost cuts once they make that sale. Good luck getting what you paid for in the services section.

John ( other John )
June 25, 2014 at 4:55 pm

Is there any reason you have to endure the constant pushing on your purchase timing?

Can you not get whoever you may report to send a resounding “Enough already!” letter, even if you only get that signed on the basis it will help price negotiations.

The practice sounds revolting. I would ask my management why I am supposed to tolerate that push.

The end of an era, I suppose. When I started out many years ago, the standard was the IBM PC. Granted the “IBM” part seems all but forgotten, but this is a graphic reminder of the end of the line and, I agree, an error. One of our clients is a global hedge fund. What handles its massive transaction volume> low-cost Linux-based Intel servers and Windows-based Intel clients. All that’s left of IBM in that firm, to the best of my knowledge, is Websphere MQ. Too bad they buy the hardware from someone else.

Belfong
January 23, 2014 at 4:18 pm

Bob, you are forgetting that IBM is trying to be like Oracle – turning into a software company that is more profitable. Also, on the commodity stuff, they have SoftLayer and its so called bare metal servers – this allows company to still run intel servers in the Cloud (public or private) – be it as a virtualised environment or as bare metal. And on the lower end, IBM is pushing their low end p-Series. All in, the sale to Lenovo may not be as dumb!

CorporateDrone
January 23, 2014 at 4:22 pm

Also as part of the arrangement , Lenovo becomes a reseller for the storage hardware and cloud services, which may allay the issues with the Chinese market.

Metalman
January 23, 2014 at 4:30 pm

Meanwhile, HP and Dell are popping open champagne. Well, Lenovo has proven to be a good competitor to those two, so it’s not all roses, but IBM is making a huge bet on a services team that hasn’t been keeping customers very happy. I can’t see this ending well for IBM; it’s like watching the end of Pan-Am.

Lack-of-Services
January 24, 2014 at 8:05 am

Agree with Metalman completely. I spent 25 years in IBM Global Services and watched the bean-counters gut the technical talent without mercy in the name of offshored low-skill ultra-cheap labor. The technical talent in the Services unit became laughable at best, completely sad at worst. Having been fortunate enough to learn good technical skills OUTSIDE of IBM prior to my 25 years, I saw the pathetic writing on the wall and dumped a 2-week notice on them with little fanfare. Best move I ever made. Now the lawsuits and canceled contracts you see customers bringing onto IBM (Bridgestone, State of Indiana, State of Pennsylvania, State of Texas, Disney, First Tennessee) are a real harbinger of how utterly disfunctional Services has become. Remember, the ‘leaders’ of this company, and particularly Services, are all MBA types with Finance skills, not technology or vision skills, therefore they haven’t a clue as to what it takes technically to make healthy I/T happen. I was on the inside and know what went on and how things stand now and as a result, I wouldn’t outsource my data entry to IBM. If they are betting on services saving the day, they are smoking some really good stuff from Colorado! Maybe Boulder….

Even More Clueless
January 28, 2014 at 7:22 pm

Well written ! so, it won’t surprise you to know that Ginny was running Global Business Services as a losing proposition long before she got promoted to the top……I wouldn’t trust her to run any enterprise, not even a public toilet. It speaks volumes about what the IBM Board is doing and how the members of the board justify holding that particular office.

I’m curious as to why IBM is such a favorite topic of yours, as they’re mostly irrelevant to mainstream computing these days. Is it because you’ve personally watched the transformation from icon to footnote, or is there something else that piques your interest?

Andrzej
January 23, 2014 at 5:40 pm

Why not self-publish the eBook? Traditional publishers are about as obsolete as IBM is! 😉

R
January 23, 2014 at 11:01 pm

If Cringely published the eBook before giving the option to the publisher of that “top-secret book,” that would be a breach of contract, and then he would not be able to afford the mortgage payments on that fancy new network and whatever else he has been replacing at home.

I don’t know if Cringely is planning to self-publish the eventual book on IBM, but a traditional publisher does offer important services. Like editing and suggested revisions. Of course, the author can hire the editor and proofreader, so it’s not necessary to go with a traditional publisher, but having a publisher is not entirely irrational.

Doug
January 23, 2014 at 6:06 pm

IBM has done some stupid things lately and is focused too much on short term goals related to stock price and profits……but this is not one of those moves. You have missed the importance of Soft Layer. I think a comment above nailed it. IBM’s future on commodity Intel servers is based on the SoftLayer business. SoftLayer addresses most if not all concerns you raised in the article.

Not many business are increasing their purchases of server hardware. Sales increases are going to cloud and service providers for the shift to the cloud. SoftLayer is the future for this business for IBM moving forward. The sale of the branded Intel server division in no way hurts or changes that view.

David M
January 23, 2014 at 6:18 pm

You say that IBM is focussing on big machines that do not sell. A parallel situation here in Australia is developers building hotels. All of them want to build big 5 star hotels, where the margins seem high. But they are also only full a few days of the year. Most of the time they have 50% or less occupancy (20% at times).

Meanwhile people who cannot afford 5 star struggle to find affordable hotels. There are not many. Its a market ripe for the taking.

You sure have it in for IBM. Why is that? Did you used to work there? Not saying you are wrong, just curious.

Metalman
January 24, 2014 at 2:55 am

Bob has his reasons, I’m sure. But from my perspective, IBM has been a tech bellweather: a company that leads the IT industry. The thing is, most pundits and/or stock pickers only listen to the people at the top, and Bob has made a living of talking/listening to the grunts. The grunts will readily tell Bob the real story, not what’s whitewashed by the talking heads. By disseminating what is really going on in Big Blue, there’s a chance that maybe the direction of the company will change. Not much of one, but the chance is there.

Idiots Become Managers
January 24, 2014 at 7:11 am

Are you an employee? Do you have any glimmer of an idea of the inner immorality and corruption in IBM management in their dealings with both their clients and employees?

Wilson Zorn
March 1, 2014 at 7:43 pm

That’s hardly fair. The person simply asked why Cringe is so particularly interested in IBM and in such a negative way. He didn’t say he shouldn’t be. And there’s lots of other companies a writer might be interested in that are also as you describe.

stevesliva
January 23, 2014 at 8:20 pm

IBM can conceive of no rationale for investing in low-margin businesses. The problem for IBM is that its high-margin businesses often get bundled with the low. Time for them to ponder whether slowing growth in services or software has to do with not being able to sell a package with the right parts. Though I suppose admitting their x86 stuff is uncompetitive might allow them to bundle their softwareservices crud with whatever cheapo hardware the customer wants.

Servers are now a commodity and IBM is getting out of a commodity business. I’m not saying they have something better to go into, but they correctly identified a commodity product as a loser. Servers are becoming all about cost and that means even the power they consume is a factor, therefore a new interest in moving to ARM CPUs. There is competition from lower cost providers like Dell and why stay with a money loser?

The question I see is the choice between the mainframe or the cloud. The lady or the tiger? The cloud is definitely in the ascendency, but why might some firms want to use a private mainframe versus the cloud?

It seems to me some companies and the GOVERNMENT would rather have control over their own destiny and data. Those are the natural IBM customers and are larger firms. Smaller players will just use AWS or S3 to reduce their IT costs.

So IBM is eliminating a low cost, commodity business. Do they have anything to replace it? Maybe not, maybe a mainframe for a very upscale customer who wants more control over their data.

IBM is in the hell of a large successful company. The stepping stones it has walked across have dropped into the mud and there is still river to cross. Why didn’t IBM offer an AWS to developers? Why didn’t IBM start a Dropbox service? I can’t speak to what they haven’t done, but dropping servers is a legitimate business move.

Dr John
January 24, 2014 at 5:48 am

I think you’ve taken the right ideas from this sale. For some these Intel low end servers are the future, as Bob states, but there are others who won’t or can’t use them.
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I knew a guy who worked in one of the banks. They used IBM servers at a million each and quite a few of them too. He managed Websphere on them and it’s charged per processor. In that model you need the most powerful processor to get value out of the software.
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Being a bank security is vitally important. For that they have to do their own systems and simply can’t trust letting a third party do the hosting. The bank must have fast secure computing of sensitive information.
.
I think what they had was the inexpensive Intel machines severing out images and anything non-critical. That way pressure was taken off the expensive servers by ones which could easily do the job.

nobodyimportant
January 24, 2014 at 7:30 am

Absolutely agree with comments about security. I don’t want my personal data, be it financial, medical or anything else being hosted on some server that is ‘who knows where’. System Z is also the ultimate virtualization platform. Heck, the early OS even had the word ‘virtual’ in its name (MVS=Multiple Virtual Storage!). A lot of institutions also have a lot of legacy code running their businesses on those machines that they just cannot currently afford to move to other platforms.
I suspect the only thing that will kill the z/OS based mainframe is the lack of skills. IBM does not make it easy to learn the skills needed to run these large enterprise systems. After all when was the last time you saw CICS being taught in schools.
Sure there are fewer machines being sold but the MIPS count is still going up and since IBM charges for MIPS usage, their revenue in that area is still going to increase and when it comes to machines at this level, IBM really is still the only game in town.

scross
January 27, 2014 at 12:14 am

You might be surprised at the number of places that still teach this stuff, if there is decent local demand for those particular skills. They are more likely to be technical schools or community colleges and such, though. In fact (and this dates back decades), it used to be a running joke around here that you went to [insert name of your favorite four-year college or university] in order to get a degree (so that you could go into management some day), but then took a few classes at [insert name of a local, highly-regarded technical school] so that you could get the technical skills required to actually get your first job in IT. And I thought at first that this actually WAS just a joke – until I started running into people who had done that very thing, out of necessity.
.
Don’t forget, too, that IBM and others also have classes on this stuff, most of which are probably on-line these days. And IBM and others have partnered with schools and colleges to sponsor educational programs on this stuff. Oracle, for example, now has a sponsored educational program with the local technical school that I mentioned above.

Former IBM
January 24, 2014 at 6:12 am

Cringely, The issue with implementing many low-cost Intel servers is that the software charges will doom in the long run. Software cost savings is the business case for the Z series in P series. Software companies make a fortune off the implementation of hundreds of so called low-cost servers. Software costs trump hardware costs in the long run.

The bottom line is that you have to look at the total cost of ownership not just the cost of the hardware.

Ryan
January 24, 2014 at 7:29 am

A quibble about your naming convention, Bob. Instead of “Intel servers”, perhaps a more comprehensive phrase would be “x86 servers”, since IBM’s business also sells Opteron based servers in addition to the Intel Xeon stuff.

Samarec
January 24, 2014 at 8:35 am

We keep hearing that the reason for selling off the X86 division is to reduce low margin products. For better or worse, the world seems to run on X86 hardware. I would think that any major vendor would like to have a supply channel on equipment. Suppose that a just as logical reason for the sale is to whack 7,500 US employees in one swift move?

Somebody give IBM a copy of “Innovators Dilema.” IBM is US Steel and Lenovo is the mini mills. Lenovo has been able to be profitable in the commodity space and are moving up the chain. Not to long from now, there will be a Lenovo IT Consultant group for high end enterprise needs.

Buckaroo Banzai
April 16, 2014 at 2:29 pm

Bingo. The tech industry has a rich history of the low-end eventually eating the high-end’s lunch. Anybody been around long enough to remember Novell? Microsoft crushed it from the low end.

Benjamin
January 24, 2014 at 9:51 am

Bob, I think you’re missing the big picture here. IBM is not now, and never had been, a company that can succeed in a commoditized market. Trying to get IBM to be the lowest cost vendor for a product set that continues to decrease in margins like the x86 low end servers is like trying to squeeze a round peg into a square hole. It’s a bad fit. That’s like saying that IBM should start manufacturing the sheet metal screws it uses. The future for IBM isn’t in commodity products.

The core value for IBM has always been the corporate data center, not the individual products they sell into that. It’s that environment that is being threatened by the Cloud. Imagine that the corporate data centers where IBM excelled in the past will now go behind the “wall” and will be subsumed by the Cloud. That is the real threat to IBM, not the dwindling value in low end x86 servers. IBM will live or die based on the success it has in leading the transition toward Cloud computing. But, it will take a dramatically different and smaller IBM to do that.

chiph
January 24, 2014 at 9:57 am

So, let’s assume IBM isn’t dumping the server business, but the *Intel* server business. And they introduce a new line of ARM-powered servers (agreement with Lenovo permitting)

While there are ARM ports of Linux available, as well as Windows RT (well…), they’d be putting themselves back into the position they were in with the original Model 5150 PC — good hardware, but no applications that customers want to run on it.

They’d probably promote running existing x86 applications via emulation, but chances of customer happiness with that approach is low. Maybe they’ll get their army of highly skilled & experienced software developers to write suites of core business applications. Oh, wait…

MrWindows
January 24, 2014 at 10:45 am

As an IT professional who works in the enterprise data center space, I can tell you IBM isn’t really losing all that much. HP has pretty much owned the data center for years, especially in blade servers, although Dell and more recently Cisco have been making significant inroads. The last IBM blade server I touched was in 2008. System x/xServer was well-built, but over-complicated and over-priced. There was nothing really to distinguish them from a Dell (except for price). Unless you’re in a True Blue IBM shop and already have zSeries, you’re not really going to see IBM as a serious alternative.
We also have a large zSeries infrastructure, where we consolidate a multi-customer environment onto partitions of our mainframes. Companies are seeing that the ongoing maintenance in terms of cost and personnel is just too high, and are looking to outsource it. So, IBM has a declining customer base there, too. Aside from the banking industry, and perhaps some government implementations, IBM no longer has a lock in the marketplace, so you’re right, they are doomed. It won’t be quick, and it certainly won’t be pretty. It will be very sad, because of the stature they used to hold in technology. But they are following their gameplan, the same game plan DEC, then Copmpaq and then early-HP tried to follow: transform into a services-based company. The problem they all failed to realize is that you need to be able to dictate what kind of services you will provide, otherwise you will be living off of the scraps of others.

Redington
January 24, 2014 at 11:17 am

The small server business is becoming dominated by PCs running Linux running Apache and other open source software. IBM doesn’t want to handle the tech support for the small servers, they seem to want to reduce headcount. Lenovo wants to slam those server boxes. Pretty soon it will make sense for enterprises to adopt Linux enterprisewide and not pay for proprietary closed Microsoft software nor pay for SaaS on the cloud. Soon it will not make sense to pay for “services” and “solutions” on the cloud when the open source software is just as good and when the cloud becomes throttled and tiered at the mercy of ISPs.

John
January 24, 2014 at 12:09 pm

You may want to check your website. Some of the formatting is a bit messed up today. Last night when I tried to read your latest column on my Kindle I repeatedly got script errors that forced the browser to restart. It wasn’t fun.

SGI and Cray must be really happy – The US DoD (and many other government agencies) won’t be buying any IDataPlexes from Lenovo.

Junius Brown
January 24, 2014 at 5:04 pm

All hail the Mighty Executives….
They don’t know how to engineer anything
They don’t know how to code anything
They don’t know how to FIX anything
They don’t know how to Build the LEAST thing.
All they can do in the end…is SELL the thing
and ride their golden parachutes to the next corporate victim…

Ronc
January 24, 2014 at 7:33 pm

Jimbo?

Roland
January 24, 2014 at 10:49 pm

I am shocked, shocked, that you would insinuate that Warren Buffet is wrong! Or am I missing something here?

Michiel
January 25, 2014 at 2:43 am

We must be missing SOMETHING here, I mean what is the plan that the *Oracle* of Omaha buys IBM stock? 😉

Anon
January 25, 2014 at 7:05 am

“Warren Buffet’s view on his 6% of IBM. “Although IBM stock has been under pressure of late, Buffett doesn’t mind, saying he won’t be selling IBM, and furthermore: “We should wish for IBM’s stock price to languish throughout the five years.”
Buffett’s carefree attitude is based on his buyback calculus. Even if IBM stays flat, an $11.5 billion buyback program, along with a 12% dividend increase, makes Buffett’s current shares more valuable. And history proves more buybacks are likely: The company has returned more than $150 billion to shareholders in the form of dividends and share repurchases. The company has slashed its share count by a third in 14 years and paid a continuous dividend — now yielding 2% — since 1916.”

Dan Frissell
January 25, 2014 at 7:51 am

Cringely: “Virtualization has allowed you to avoid buying new hardware: exactly! IBM NEEDS you to buy new hardware for them to be successful”

Bob, I think you are missing the forest here and being too focused on one tree. The point is that customers are NOT buying this hardware, they are buying cloud platforms for their applications… the cloud service providers are buying the hardware, which is why it is becoming a commodity. IBM selling the x86 server business is EXPECTED after Softlayer – rather than sell a customer on putting in servers (and you forget ALL the infrastructure needed around the servers, which is the real cost folks seem to ignore), provide the hardware platforms via the cloud and Softlayer – which has much more future opportunity for growth and profit margins that x86 servers.

Arthur J
January 25, 2014 at 12:38 pm

I agree with Bob, that IBM is doomed if they think System/Z is where the money is. We are a mid sized Z shop and the low cost servers are taking over. Z is simply too expensive compared to x86 machines both in hardware cost as well as software. A low end Z machine is around five million dollars, never mind all the ancillary devices like disk drives and such. That buys a -lot- of intel mips that can run rings around that Z box.

We’ve been experimenting with Linux virtualization as a way to justify the cost of the Z machines, but it’s a dead end. Even IBM says you shouldn’t do much more than serve static web pages off such vm systems, that they can’t handle cpu intensive applications. So we run some pilot projects, but I don’t see anything coming of it. There will be no large migration from real x86 servers to z/Linux vms. I expect within 10 years we’ll be unplugging the last mainframe.

FormerIBM
January 27, 2014 at 6:07 pm

A low end z server can be had for less than $250,000 for Linux. Using z virtualization and Linux can drive down your total cost of ownership making those seemingly cheap x86 servers seem expensive. Cringely has a PC mindset and clearly does not understand Enterprise computing and it’s costs.

The mainframe can reduce costs even when compared against so called cheap Intel servers.

scross
January 28, 2014 at 7:59 am

I haven’t looked directly at IBM hardware prices for several years now, but historically their P-series and I-series servers can often be had for a fraction of the cost of a Z-series. Unfortunately, Z-series customers are accustomed to paying a lot of money for their stuff, and IBM et al. are used to taking that money from them, and this really needs to change. IBM has been in the process of consolidating their other hardware lines and taking advantage of economies of scale and decreasing hardware costs in general, so maybe their plan is to let more of their Z-series customers take better advantage of this now, too. Otherwise they’re just inviting them to leave that platform and try to achieve lower costs elsewhere (not that lower costs are actually what happen for them in the end).

John
March 28, 2014 at 7:59 am

The mythical perception of the mainframe and System P lives on, even within IBM. The majority of IT people today don’t believe they could buy a single System z Enterprise Linux Server (ELS) for less than the x86 environment they’re building. Furthermore, on the mainframe, software licensing requirements and cost, as well as power cost are commonly 75% less than the x86 platform. Very few have done the math.

Think about it for a moment. When was the last time you heard someone did the research to compare the cost of that massive $500k x86 linux environment to the cost of a System z ELS capable of running the same workload? It doesn’t happen very often, but it should.

Arthur J
January 29, 2014 at 12:21 pm

That’s an IBM joke, right ? I can buy a dual xeon x5680 for $10K that has more processing power and memory than one of those $100K IFL engines. That $250K isn’t even a working machine. I doubt you have priced in DASD, controllers etc., all of which are included in my $10K server.

z/Arch hardware can do a lot, but being economical compared to x86 hardware isn’t something it does well.

I was wondering the same thing – for $250K, I can buy an entire rack full of mid-range x86 servers, the storage to back them, 10GE interconnect, and still pay for the admin to run them for a year. What does z-virtualization get me that OpenStack doesn’t? Seriously, I’d like to know what value proposition IBM is making in this market.

John
March 28, 2014 at 8:18 am

Arthur, check pricing with a System z business partner, those numbers are way high from what I see. With that said, the size and scale is important here though. Smaller shops may confirm x86 is less expensive, but there is a tipping point in scale many don’t consider.

Depending on the type of workload, a single IFL core can run the equivalent of up to 40 cores of x86 workload. Use 20 cores as a conservative estimate, then calculate the cost of paying for 20 cores of licensed software, versus 1 single IFL core. Then calculate power requirements using your local utility rates for an 1850W power supply versus power to run racks and racks of x86’s. Simply shop it around with business partners like you would anything else. You might be surprised. What’s the risk?

Mark W
January 25, 2014 at 6:15 pm

IBM has lost so much outsourcing business that the ability to sell xSeries into those accounts has likely slowed down considerably. At some point in time you begin letting staff go and then other non-human resources. xSeries being sold was a matter of time. Where do you think that cash is going? Straight to the shareholders baby…. and THAT is why buffet is staying put. He could care less about how the cash is raised and that makes him smart.

Secondly, I do believe HP servers are becoming the “Compaq” servers of old; and they creamed IBM for a time.

An IBMer
January 26, 2014 at 3:12 am

To quote Shelley….

And on the pedestal these words appear:
‘My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!’
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.

I really enjoyed the article. I don’t disagree with it.
But.
If I were IBM I would unquestionably do the same.
Well… we both know that to paraphrase the economist “in the long term, all the server markets are dead”.
There’s going to be innovation that makes both the high end and the low end obsolete.

You would know when this is going to happen better than me, but it isn’t 10 years.

So….. you have to sell the seed corn if it is going to go stale.

Bill
January 26, 2014 at 2:39 pm

Considering your earlier articles about IBM failing their own internal security audits.
perhaps they were looking at a crash and burn with respect to their server business.

If so, maybe not giving overtime to sysadmins came back to haunt IBM
.

I’ve always thought that the priorities for any business firm was to:
.
1. Get customers.
2. Satisfy customers.
3. Make a profit.
.
You will notice that making the stockholders happy, paying big bonuses to the officers, and screwing the employees is not on this list. Therefore, I think that IBM has their priorities all messed up.

Bunny
January 26, 2014 at 5:49 pm

Just remember IBM was the company that thought personal computing would never amount to anything.
So we will just get Microsoft to whip up some quick software for our PC OS.
As long as managers and CEO’s are blind and don;t see that the emperor (IBM) has no clothes things will go OK. If the illusion is disrupted then all would be doomed, but as with GM, maybe the public can be sold on a bailout as it is big to fail even though it could be too big to succeed.

scross
January 26, 2014 at 11:56 pm

IIRC, what you and I know as the “original” IBM PC (and the one that “legitimized” the entire business PC market, to use a word which was popular at the time) was actually at least their third or fourth iteration of a personal computer – so they weren’t exactly neophytes at this game. But what was very different about it for IBM was that it was a relatively open platform and built primarily with off-the-shelf parts. (This is also what made it relatively easy to clone.) But even with the IBM name on it, it basically languished for a year or so until Lotus 1-2-3 came out and caught fire. Then everybody WANTED 1-2-3 so everybody NEEDED an IBM PC to run it on, at least until the clones (led by Compaq – remember them?) caught fire, too.

In any case, IBM was certainly correct about one thing here – having a bunch of PCs (and later a bunch of Intel servers) never has been and never will be a proper substitute for centralized enterprise-class platforms with enterprise-class security and reliability and manageability and economies of scale and so on and so forth. The server folks have been trying to get there with virtualization and “clouds” and such, but when all is said and done they will probably just end up having re-invented the very platform models that in the past they so callously disregarded as “outdated dinosaurs”. And people like me will just laugh, and a company like IBM (if it survives to see the day) may just laugh all the way to the bank.

Billy Bluewash
January 26, 2014 at 10:19 pm

I spent most of the last decade and a half inside STG at IBM. Was recruited to come to IBM and spent a lot of time marveling or more accurately “mystified” at the way things were done. Countless acquisitions were made in the time that I spent there and everyone had to go through the “BlueWash”. The equivalent is running through an endless double line of management equipped with wiffle bats who’s sole responsibility was to beat them about the head repeatedly until they finally relented to “the way we do it here”.

Everyone that I spoke with was initially happy to be acquired by a “giant” in the industry, but that soon changed. Each member was offered substantial compensation to stay and insure success, on the average of 2 years. At the end of the 2 year period, most if not all were so shell shocked and numb for the aforementioned “wiffle bat” experience that they couldn’t wait to run for the doors. If you don’t believe me, ask the folks in Canada about their Cognos experience.

All the Wall Street experts exclaim the accomplishments of such a legendary bellwether, but the view from inside is decidedly different. My viewpoint was the company is run by accountants and spreadsheet jockeys, neither of which have any idea of business acumen besides what appears on a spreadsheet.

In previous companies, if one were to achieve success with a product, every effort was made to improve that product and make it more successful. Not quite the IBM way. Once a product proved to be successful, the model seems to be, “how can we make this more profitable?” So the first thing that happens is they cut the budget….say 10-15% and raise the sales projections by similar amounts. If that product were to achieve those goals, despite the odds, they again, would reduce the budget by similar amounts and raise the goals a like amount. Several products, Websphere, DS8000, BladeCenter and SVC were able to achieve “success” in this manner, yet, despite the success, the yearly “Fall Plan” (which is a whole nuther story into itself) saw a constant decline in the resources for each of these products. The end result was feature/functions became fewer and farther between, support resources became much more constrained and customer satisfaction continued to reduce at about the same rate as the resources. It was amazing to hear executive discussions wondering why customer satisfaction was diminishing. To those of us in the trenches, it was pretty clear….duhhh.

IBM never outright kills a product, they just continue cutting resources until it reaches a point where sales revenue approaches the amount they are spending on it. Then it either dies or they sell it off like they did with the printer business (once legendary), the hard drive business or the laptops, of which Lenovo was able to not only revive but turn around quickly and become dominant in the industry. I suspect they will have similar success with the x86/Blade/PureFlex business.

IBM has had some tremendous people, the guy who invented the 3 finger salute Cntl+Alt+Del (sadly passed away last year), a team that invented the supermarket barcode scanner, the team that designed the system for BART, the fathers of the ATM, the original x86 PC, and a guy that when I first joined was dragging atoms around to construct the first atom transistor while we were worried about whether a Qlogic HBA was as compatible as the Emulex HBA. Yet, these resources are constantly being devalued as more and more responsibility is shifted to college hires across the globe. These are typically smart kids, but there is an old saying “Experience is so valuable because you can’t buy it”.

I don’t agree with the pundits that say IBM will die, but also believe that there are more hard times ahead then there are good times. Times are a changing and while “playing it safe” has ensured stability for more than 100 years, that strategy will not serve well for the coming changes in technology. Dreams of cloud computing and the ability to compete with the Amazon’s and Google’s of today have left this bellwether a long ways behind the 8 ball. Have since moved on to other opportunities and while I love my former colleagues, I fear for their safety, Apollo is but the next great adventure for them and thankfully I will not be a part of that exercise.

CJones
January 27, 2014 at 8:02 am

Very well said. I spent 30 years there and the last 10 were very painful. The PE roadmap strategy, and Ginni downloading the PWC virus set the course for the culture of slash, burn and focus only on “what is in it for me”.

Ronc
January 27, 2014 at 5:49 pm

While I can’t disagree with anything you said, I keep stumbling over the phrase “Experience is so valuable because you can’t buy it”. Actually, that can be said about any skill set that requires learning. From the point of view of a company, they can buy experience by paying those with it to stay. Yet it seems the opposite is happening in that experienced people are fired or retired to save money at many companies, not just IBM.

Njia
January 27, 2014 at 8:04 am

I am a bit ambivalent about IBM selling off the low-end servers to Lenovo. On the one hand, I see the logic of the “SoftLayer” argument made elsewhere in the comments. On the other, IBM has not indicated that this was the reason for the move. In fact, at a transaction price of $2.3 B and statements made by IBM regarding the sale, it really suggests the opposite: IBM simply wanted to exit the business and re-invest the cash.

Getting out of a commodity business is not wrong of IBM. As stated elsewhere, IBM – with its bloated overhead – is not and has never been in a position to compete on price. Low-end hardware simply doesn’t have the margin IBM needs to support all those executive perks and top-heavy management structure. Lenovo knows how to compete in a cost-driven environment (although servers – even Intel-based – are not ThinkPads).

My biggest concern is that if IBM sees its future in cloud, Watson or whatever, it needs to be able to execute. I wonder if it has enough left in the tank to do so.

wako
January 27, 2014 at 9:10 am

I was there 30 yrs too and left last October. It´s not just the “low” end X86, that has been given away. It includes Blades and PureFlex, which in turn can drive quite medium to large ERP installations like SAP or Oracle. This competes with Power platform, as a matter of fact, this has already been ongoing within IBM (XSeries vs. Power). Also, the stuff can be vrtualized (VMWARE or Linux based).
So Lenovo will also be a competitor from now on, competing with Power Unix and Power -i-Series.
Another aspect is the whole engagement of IBM in the socalled “MidMarket” Segment. Up until recently, this was seen a high-growth customer segment. All of a sudden, they are running out of products for this customer segment ( o yeah, there is now Softlayer, eventually, great )…. I guess they will reduce the Midmarket sales organization as a consequence soon. Some actions have already started, as IBM is consolidating Inside Sales teams in Dublin in Europe for instance, pulling sales resources further away from customers to remote centers (cost cutting ?)…. Great ???

Barney Fyfe
January 27, 2014 at 9:30 am

I retired of my own volition on December 31, 2013. The last 5 years saw a dramatic shift in IBM business with executives micro managing all the way down to the hourly employee. They are out of control. They do not want to hear from the troops. The troops that bring forward customer experience, comments, displeasure. Execs simply don’t believe that we know what we are talking about. Just get in the boat and row. They are simply hell bent on forcing customers to like what they offer. Period. This business model is doomed to fail as demonstrated with lawsuits. I am sure more will be coming.

PureFlex or Pure Systems. What a dumb name. Sounds like a water filtration system for your home. Remember what happened to Coke when they changed their formula? And CLOUD? My personal opinion is that cloud is a security disaster waiting to happen. Who is going to control security in the “cloud”.

Oh… btw… HR and the bean counters are running the company.

OtherKevin
January 27, 2014 at 10:07 am

There’s an awful lot of wailing and gnashing of teeth in these comments about how this marks the end of IBM. It doesn’t, not by a longshot. While some of Mr. Cringely’s comments about things that IBM is doing wrong may be correct, selling this low-margin business is not one of them. Look at the other two major players in this market: Dell was recently acquired in a leveraged buyout, and HP is struggling as well. Mr. Cringely specifically cites the examples of Google, Yahoo, and Amazon as users of massive farms of commodity (x86) servers, but what he has left out is that they are not buying IBM’s servers, or Dell’s servers, or HP’s servers. These giant web properties and cloud providers are engineering their own solutions for extremely low-cost, commodity hardware, and then taking their orders to the same Taiwanese and Chinese manufacturers that build for Dell, HP, and formerly IBM. Look at Microsoft, who just last week was seen filing patents for their own commodity blade server design for use in Azure datacenters. Where exactly is IBM’s play supposed to be in that business? They can try to keep selling to enterprise and SMB customers while those same customers are cutting server purchases and buying more cloud services instead. That hardly seems like a winning proposition.

Furthermore, Mr. Cringely points out that IBM is keeping the higher margin lines of hardware, as if they were betting the company on it, and that’s simply not the case. Too many self-proclaimed Internet pundits think that IBM = hardware and don’t know anything more about the company than that. But if you add up the revenue figures from IBM’s 2013 quarterly reports, you’ll see that their Systems Technology Group accounted for $14.2 billion dollars in revenue, out of a total of $99.8 billion for the year. But the “Systems” group isn’t just the commodity server division that they are planning to sell Lenovo. The Systems group also includes their Power and mainframe servers, their various storage system lines, their semiconductor business, and pretty much any other hardware that IBM produces. How much revenue are they really losing by selling their commodity server business? Perhaps $3 billion or $4 billion, at most? Sure, that’s a lot of money, but revenue in this segment has been declining year-on-year, and acting as a drag on the company’s financial statement for at least as long.

Companies re-invent themselves all of the time, especially companies that are around for 100 years. I’m sure that there was much wailing and gnashing of teeth when IBM quit making the Selectric typewriter, too. IBM’s future isn’t in hardware. It’s in high-margin software and services. Actually, that’s not true. If you look at the percentage of revenue and profit that IBM earns from it’s various segments it’s fair to say that IBM’s PRESENT is in high-margin software and services. The IBM of the 2020’s may not much resemble the IBM of the past, and it may even be smaller than it is today, but it will still be around.

JustRuss
January 27, 2014 at 11:37 am

You make a good point. As cloud services continue to expand, local data centers will decline, and Amazons and Googles aren’t buying their servers from IBM and Dell. Pulling out of a shrinking market may be a good move on IBMs part.

Ronc
January 29, 2014 at 5:13 pm

I’m beginning to think the title of Bob’s column should be “IBM sells Intel Server Business, Company Doomed Anyway”.

I used to work at IBM on one of their middleware performance teams. We would test and improve the performance of our software product across all the enterprise server platforms (P-Series, i-Series, z-Series, and x-Series from IBM in addition to Solaris/Sparc and HP-UX servers). So I can definitely say that selling off the low end (xSeries) to focus on the high end (P and Z) makes a lot of sense, if IBM had a time machine and could travel back to 2004 when the P5 came out.

The Power 5 servers were amazing compared to their competition. Our software benchmarks were designed to stress the Application Server, not the Database server, so a smaller database could support a much larger App Server, or so we thought. The P5s were so fast that our 4 core Intel Database machines couldn’t keep up with our 4 core P5 boxes. The only machine we had that was fast enough to run the Database tier for a P5 app server was another P5 box. Add to this a seeming insurmountable lead in LPAR and Virtualization technology, and a superior profit margin, and one could easily make a case for selling off X to preserve the dominance of the Power technology platform, which backs all of IBMs servers (P,I, and Z).

But as I said, that was 2004. Then Sam went to work turning IBM into a holding company that he and other top execs could loot. First wages were basically frozen because we never made our internal goals no matter how much we beat Wall Street. Then we stopped getting co-ops and college new hires. Soon we had a yearly layoff, then bi-yearly, then quarterly. Product development and R&D budgets plummeted, squeezing the most profit out of our current products, at the expense of the next generation.

By the time I left the team in 2008, Intel had pretty much caught up core for core with Power; now it’s not even close. Intel has the fastest server processors on the planet. Everyone else is years behind given the current levels of investment. So while it’s good that IBM finally got out of the commodity server business, it’s really really bad that they did it 10 years too late. It also begs the question, how to they expect to compete in the cloud business, if they don’t understand how to make commodity infrastructure profitable?

Keith Sloan
February 4, 2014 at 6:55 am

What I think should be worrying for IBM is I don’t see Cloud as a high margin business. Back in the days when I worked in the city of London all the time sharing and Info systems customers would buy Amdahl’s rather than IBM because they were cheaper and the cost of hardware had a very direct effect on their margins and bottom line. Banks and Insurance companies could afford to buy IBM because IT was such a small part of their business. So unless IBM has some tricks up their sleeves I can see cloud becoming a low margin business very quickly, just as it was for the time sharing and financial info systems of old.

[…] journalist Robert Cringley thinks IBM is doomed because it just sold its Intel server business to Lenovo. On the contrary, this may […]

Exodus2009
February 4, 2014 at 2:57 pm

Contractors who were funded through the xSeries product line were let go today since they were not “in scope.” Looks like phase 1 of “get rid of all the people who do the work around here” is in full swing. Regulars to be let go by March 31st.

[…] Not your father’s IBM Something’s rotten in IBM Dubuque Magical thinking at IBM How to fix IBM in a week We’re all just lab rats to IBM By 2015 IBM will look like Oracle Fulfilling customer requirements is a weapon at IBM The New IBM — vampires in our midst IBM to customers: Your hand is staining my window The Decline & Fall of IBM IBM sells Intel server business, company is doomed […]

I see that they are GTS (xSeries guys). My heart bleeds for them……………… If only they get rid of 75% of the rest of the staff in India, customer satisfaction would grow exponentially.

Robert Eisenhardt
February 16, 2014 at 5:41 pm

And now the global cuts are coming, India and now China. Ginny is cutting everything she can to keep RoadKill 2015 alive and well. This is insane. US cuts to shortly follow probably February 26. IBM is doomed if it continue to eat itself alive to stay alive. Donner party comes to mind.

C
February 17, 2014 at 8:57 pm

The elephant can dance. You can buy a typewriter ribbon from them. One. By mail.

Just because they choose not to doesn’t mean they can’t.

Ronc
February 18, 2014 at 5:23 pm

“can’t”. Who said someone or some company can’t do what?

JAFO
February 24, 2014 at 2:55 pm

I don’t think this is a big loss for IBM. I think they come out ahead. The System x guys (at best) produce a mediocre product. It’s expensive and there is very little differentiation over the competition to justify the high price.

Maybe Lenovo will whip them into shape. I doubt it. Not unless they take all the IP and move it all to China and manufacture it there. Intel is doing all the heavy lifting with regards to R&D. You don’t need the best and brightest. Just a few engineers smart enough to read what Intel is giving them and design around it.

One of the other interesting aspects of the deal is Lenovo will rebrand and sell IBM mid-tier storage (Storwize). Is this an attempt to break up a recent alliance between EMC and Lenovo and open up a new channel for IBM storage sales?

muse1492
March 12, 2014 at 10:50 am

In a nutshell, after more than 10 years with IBM, we are becoming burnt out and institutionalized especially after multiple years without Raises and Bonuses – at least none worth speaking of because they were a worthless joke that barely covered increases in other deductions. There is no incentive because through RA’s they have rewarded hard work with more work without equitable compensation, and expect exempt (salaried) employees to pickup the slack. Many are just holding out for a package and/or parachute with a decent payday to carry them over until their next opportunity or retirement. Many in my area no longer fear layoff, we welcome it and think that those that were RA’d before us were the lucky one’s to be paroled. Yes, I used the word “paroled” – Paroled from the oversight of multiple useless levels of bean counting overseers, err, management. Sure when the RA comes, there’s the initial shock that its happened to you, but most people I’ve talked to feel an extraordinary sense of relief and freedom soon after. Most feel bad for their Teams and Customers they are leaving behind, but there is no love loss for IBM. Within a week they start planning their month long vacation and rebound, and many have rebound within 60 days and still have severance in the bank to cushion them for any more rainy days. Heck, I’ve seen several come back as Contractors within 90 days doing better, especially since they are less beholden to the internal IBM politics.

Greg
March 25, 2014 at 5:13 pm

Robert, the facts also include a world were IaaS (Infrastructure as a Service) Google, Amazon Web Services, Box, Rackspace et al start to erode the low cost world of TIN!

[…] It looks quite imminent that IBM is fully getting out of the hardware business. They’ve recently sold off Retail Store Systems, and the sales of System x and Flex are pending. Also, within a few days IBM’s System Group is eliminating their as-to-now strategic industrial design and human factors department. So, it looks doubtful IBM will be doing any significant new hardware products, like with their remaining System p and storage systems. Abandoning the hardware not only marks the end of an era, it also marks an end to perhaps IBM’s best examples of creating excellent user experiences and deeply connecting to it users. For me, as a recent IBMer, it’s a little sad. Some think they are doomed. […]

1sang
April 8, 2014 at 5:38 pm

Just talked to a IBMer friend.

The Lenovo deal may have some business sense, but one may also think this is

aligned to Roadkill 2015.

Recent RA wave is hitting most countries and not limited to BRIC, nor just

the STG business. Project managers are running projects with no or very

Bob,
I worked for IBM from 2008-13 and got hit in the layoffs last year. All the ranting here, if anything, is understated. It’s an absolutely evil place to work, ideas don’t matter – at all, and the only thing that counts in your yearly review is how many asses you kissed on your R&R ‘board’ (the proudly claimed ‘1s for years’ make me chuckle — but I understand the need to latch onto those, even though they’re not based on any form of functional – versus political – reality for the vast majority of the company). Just tonight I ran across your blog, and I found it fascinating to read all of this, and frankly, therapeutic, because it so emotionally taxed me and my family. (And already I work with a bunch of ex-IBMers and we all love to tell war/stupidity stories about working at IBM.)
I have a question for you: I see nothing in your background about IBM. Why the ‘crusade’?

Taking apart the love or hate for the company one worked for and sticking to topic I can’t see the problem of selling their X series. IBM had very good reliability with this series compared to HP let’s say, but the cost!! Man, if you were not an big client where you would just give millions to IBM early and get big discounts, nobody in his own mind would buy IBM over Dell. How can you explain to the manager in QA let’s say who has a new project that by paying more than double he would get “some” improvement in performance?
A huge corporation like this needs to adapt otherwise it just goes down. The market for these cheap servers is going down fast. Look at the mobile phone market now. Where was Nokia 7 years ago? Where is it now? How many people heard about Huawei a few years ago, yet today they are the 3rd manufacturer by sipped units. Cheap hardware is the future, the author is right, but IBM was not making it cheap. Soon manufacturers like HP will feel the winds of change from China in their back and will try to get out of this market. As for support, don’t worry. There are companies that live out of support, and can make it better than IBM or Oracle. BTW, do you know that Ericsson is offering support on other vendors to his clients, just so they can cash something more?
The world as we know it with BIG HW and Software vendor, support contact, BIG partner has ended with the migration to cloud. You can of course sstill make money yet out of banks, insurance, healthcare… but not for long, as the hybrid cloud is no longer something exotic and for testing purposes.

Phunsuk
May 8, 2014 at 2:11 am

Well, Imagine a world where employees can access the applications they need to use/conduct ‘productive’ work from a dumb or a whittled down terminal, ten years from now. The access point becomes very inexpensive. IBM is planning a future which five-ten years from now would actually be a reality, with the computing crunched in to a single entity. In the meanwhile, IBM is going to sell what it can, slowly, and pump some steroids in the EPS. Maybe a sound strategy.

On the other hand, my thoughts go to Steve Jobs, who emphatically told his team when questions were raised whether a beautiful iPhone/iPod would cannibalize the sales of already in-market iPods, and whether its necessary to launch a revolutionary product which is going to cannibalize so obviously their own star product. Jobs answer – if you dont launch a great product assuming that it would cannibalize your current product, somebody else will launch the great product. Time and again this philosophy, comes across in Apple’s product releases. Maybe Jobs is a consumer guy and his thoughts may not apply to Enterprise IT. But maybe they do. IBM, for sure had everything in place and might actually have had several ideas stored and archived somewhere, where research papers outlining SaaS and cloud services might have been reviewed and rejected. Its possible the sole criterion is that the new ideas would cannibalize their current pricey products in market. Future money for enterprises is like, ego is to humans. Many profs in distinguished universities get upset of their students research work leads to some contradiction of the Prof”s published ideas. But why should IBM be not worried. Well, why should the Prof be not worried that truth is being delayed. The Prof might reason that as long his findings are not relegated in his lifetime, he is fine. Similarly, the IBM top decision makers might think as long as the company EPS does reasonably well and they retire – why should they bother with a new idea?

Phunsuk
May 8, 2014 at 2:19 am

I missed out….”where research papers outlining SaaS and cloud services might have been reviewed and rejected..” should be read

“where research papers outlining SaaS and cloud services might have been reviewed and rejected, much before Saas and cloud services arrived on scene”.

IBM already had the ‘concept’ of centralized computing in place. It had a serious edge in technology, which is similar to vitualization, cloud computing, parallel processing and pay-as-you-go resource-used computing. The guys who thought of the possibility and rejected the idea might be happily retired by now. Ironic.